China Stocks Jump on Economic Plan to Become Asia’s Best Market

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, gained 26.50, or 0.9 percent, to 2,968.81 as of 9:42 a.m. local time, the highest since Nov. 15. Photographer: Qilai Shen/Bloomberg

March 7 (Bloomberg) -- China’s benchmark stock index
rallied today, making it the best performer among Asia’s major
markets in 2011, after the government said domestic consumption
will drive economic growth over the next five years.

Gree Electric Appliances Inc., China’s largest maker of
home air-conditioners, climbed to a record high and Qingdao
Haier Co., the country’s biggest maker of refrigerators, gained
4.4 percent after Premier Wen Jiabao said incentives for rural
purchases of home appliances may boost spending. PetroChina Co.
and China Shenhua Energy Co., the largest producers of oil and
coal, surged as oil prices climbed.

“There will be active investment and construction
activities at the beginning of the five-year plan,” said
Victoria Mio, a Hong Kong-based portfolio manager at Robeco Hong
Kong Ltd., whose parent oversees $200 billion. “The A-share
market has a window of opportunity for a rebound.”

The Shanghai Composite Index, which tracks the bigger of
China’s stock exchanges, gained 53.90, or 1.8 percent, to
2,996.21 at the 3 p.m. close, the highest since Nov. 15. It has
surged 12 percent from the 2011 low set on Jan. 25. The CSI 300
Index advanced 2 percent to 3,334.51 today.

The Shanghai gauge has rebounded 6.7 percent this year,
after plunging 14 percent in 2010, on signs the world’s second-biggest economy is withstanding tightening steps. Manufacturing
growth is still expanding after the central bank boosted banks’
reserve requirement ratio eight times since the start of 2010,
while raising interest rates three times to rein in inflation
that reached 4.9 percent in January, near the 28-month high of
5.1 percent in November.

Retailers Jump

The government will target 8 percent economic growth this
year and “decisively” curb increases in prices that may
threaten social stability, Wen said in his state-of-the-nation
report on the opening session of the National People’s Congress
over the weekend. The premier had already disclosed an annual
growth target of 7 percent for the five-year plan, running from
2011 to 2015, down from the previous 7.5 percent. The goals are
routinely surpassed, with China’s economy expanding an average
11 percent over the past five years.

“Expanding domestic demand is a long-term strategic
principle,” Wen said. Subsidies for urban low-income earners
and farmers and continued incentives for rural purchases of home
appliances may boost spending, he said.

Retailers, electric appliances makers and agricultural
companies may have reported 2010 earnings exceeding estimates,
according to China International Capital Corp.

Stocks Outlook

China’s stocks may extend their gains this month as
inflation probably eased in February and the government shifts
its focus to “maintaining stability” amid Middle East tensions,
Hou Zhenhai and Wang Hui, analysts at CICC, wrote in a report.

The government’s plans to boost domestic consumption and
invest more in underdeveloped industries including technology
will lift the nation’s stock market, said Robeco’s Mio.

Consumer, alternative energy, agriculture, Internet and
software companies will benefit most from government efforts to
cut the economy’s dependence on exports, she said. Investors
should avoid shippers, export-oriented companies and railway
construction stocks, Mio said.

Annual Gain

The MSCI China Index may rally 13 percent in the four weeks
following the National People’s Congress led by property
companies, CLSA Ltd. said in a report today, citing the average
gain after annual meetings since 2006.

A gauge of oil and coal companies in the CSI 300 surged 7.3
percent, the most among the 10 industry groups. PetroChina added
2.6 percent to 12.10 yuan. China Petroleum & Chemical Corp., the
nation’s second-biggest oil producer, also known as Sinopec,
rose 1 percent to 8.84 yuan.

Crude oil for April delivery gained as much as $2.02, or
1.9 percent, to $106.44 a barrel in after-hours trading in New
York. Prices surged amid concern unrest in Libya will spread to
other oil producers in the region and as a falling U.S. jobless
rate signaled that fuel demand will climb. Libyan leader Muammar
Qaddafi sent troops to recapture towns in the western part of
the country and prepared to quash protests in Tripoli.

Shenhua jumped by the 10 percent daily limit to 28.37 yuan
after the company received approval from the National
Development and Reform Commission to start developing a coal
field in Inner Mongolia.